Sep 292004

Picking Your VC

Jeff Nolan has a great post entitled Pick Your VC Carefully. A must read for any entrepreneur (or VC for that matter).

It’s worth the full read, but his main points are:

1. Pick the right type of investor — big, small and specialized, financial, corporate.

2. Check their references!

3. Make sure you understand how much pull your investor has within his or her firm.

All good advice, some overlap with my posting on How to Negotiate a Term Sheet with a VC. My only addition beyond what’s already in that post is that if you’re adding a new investor into a syndicate, make sure you have your existing investors spend time speaking with the prospective investor, both with you present and without you present. You’ll learn a lot about your future board dynamics that way.

Filed under: Entrepreneurship

Sep 292004

Comment on Political versus Corporate Leadership, Part II: Admitting Mistakes

Comment on Political versus Corporate Leadership, Part II: Admitting Mistakes

My colleague Mike Mayor writes:

So you’e only asking for politicians to be honest Matt? Is that all? :)

Couldn’t agree more on the CEO side. A CEO who cannot admit to failure is doomed to be surrounded by “yes men” and, therefore, must go it alone, whereas the CEO who admits to having the odd bad idea every now and then is more likely to get truthful and accuruate information from those around him/her. Which scenario would you prefer to base your next decision on?

However, I look more to Hollywood for fostering the faux CEO/Board Room stereotypes, not politics. Look no further than the highest ranked show among 18 to 46 year olds: The Apprentice. Trump is just one contemporary example of successfully perpetuating the “kill or be killed” mentality of the ideal CEO. In his book, “How to Get Rich” one of his lessons is to “never take the blame for anything” (meanwhile Trump gets rich by being a caricature of a CEO).

The ideal CEO needs to set the example for the behavior of his employees, and creates opportunities by building relationships not “squashing the competition.” And like it or not, the ideal Board Room is actually a Think Tank of great minds working toward a common goal rather than a place to play mind games and mental poker.

Unfortunately, both of these things make for a horrible TV show but do contribute to building truly great companies! On the other hand, watch too many TV shows (or follow the politician’s lead) and you’ll likely become a CEO whose success is comparable to the CEOs of Enron and Tyco.

Sep 282004

When Do You Hire a Real Head of Sales?

When Do You Hire a Real Head of Sales?

A fellow entrepreneur I’m friendly with who’s got a really early stage company asked me the other day when he should hire his first head of sales.

I think the answer completely depends on what kind of business you’re in and how dependent it is on external relationship building, and also what kind of entrepreneur you are. But I tried to distill my answer down to three things for him to think about:

If your company requires a meaningful amount of customer participation before your initial product is launched, you need to invest in sales months ahead of anticipated revenue. This was the case for us at Return Path. We hired our first head of sales five months before our anticipated launch because we needed to have 10-12 beta customers on board in order to have a successful launch.

If you can wait until your product is developed and ready to ship before selling it, you can afford to wait longer if you’re handling early market development and requirements yourself. However, when you find that you don’t have time to call back interested high value prospects within a single business day because of competing priorities to get your business off the ground, it’s definitely time to bring someone in. This is especially true if you’re in a buzz business where you have prospects calling YOU to ask if they can try out your product or service.

Finally, in either case, the trick is timing. The moment you actually need a head of sales is too late to start looking for one, since that process can take a few months. So what you have to do is make your best effort at figuring out 2-3 months ahead of time when that urgent need will pop up and start your recruiting efforts then.

Sep 222004

Political versus Corporate Leadership, Part II: Admitting Mistakes

Political versus Corporate Leadership, Part II: Admitting Mistakes

The press conference this past spring where President Bush embarrassingly refused to admit that he had ever made any big mistakes, other than to reiterate his gaffe at trading Sammy Sosa when he owned the Texas Rangers, brings up another issue in this series: is it good for leaders, both political and corporate, to admit mistakes?

On the corporate side, I think the ability to admit a mistake is a must. Again, I’ll refer back to Jim Collins’ books Good to Great and Built to Last, both of which talk about humility and the ability to admit mistakes as a critical component of emotional intelligence, the cornerstone of solid leadership. And in another great work on corporate leadership, The Fifth Discipline, writer Peter Senge talks about “learning systems” and the “learning organization” as far superior companies. My experience echoes this. Publicly admitting a mistake, along with a careful distillation of lessons learned, can go a long way inside a company to strengthening the bond between leader and team, regardless of the size of the company.

But in politics, the stakes are higher and weirder — and the organization is a nation, not a company. Publicly admitting a single mistake can be a leader’s downfall. It’s too easy these days for political opponents to seize on a mistake as a “flip flop” and turn a candidate’s own admission into a highly-charge negative ad.

There was a fantastic op-ed in The Wall Street Journal back on April 15 on this topic, which unfortunately doesn’t have an available link at the moment, entitled “Bush Enters a Political Quandary As He Faces Calls for an Apology.” I’ll try to both quote from and summarize the article here since it’s central to this topic:

“For a politician, is an apology a sign of weakness or strength? That is the debate now swirling around President Bush after a prime-time news conference in which he refused reporters’ invitations to acknowledge any specific mistakes in handling the issue of terrorism or offer an apology to Sept. 11 victims’ families. Mr. Bush deflected the invitation, saying, ‘Here’s what I feel about that: The person responsible for the attacks was Osama bin Laden.’ Mr. Bush’s quandary is a time-honored struggle for politicians. While some have found a public apology helps them out of a tough spot, others discovered it can fuel more criticism. So far, there isn’t a definitive answer.”

The article goes on to say that while Harry Truman’s “the buck stops here” mentality was de rigeur in the Beltway for a while (through Kennedy’s Bay of Pigs fiasco and Reagan’s poor handling of Beirut), nowadays, apologies are a dreaded last resort. The reason? The rise of partisanship and the use of ethics and congressional or special counsel investigations used to humiliate or defeat political opponents by raising the spectre of corruption. The examples? Gingrich’s struggles in 1996 over his book; Clinton’s ridiculous linguistics machinations (“it depends what the definition of ‘is’ is”) around the Lewinsky scandal; and Lott’s downfall over segregationist comments.

The piece wraps up by saying that “Mr. Bush was backed into the apology quandary by one of his administration’s toughest critics, former White House terrorism expert Richard Clarke…Since then, White House officials have been pressured to do likewise [apologize to victims’ families about the government’s failings on 9/11] — or explain why they won’t…[but] aides are convinced that admitting error would only embolden Mr. Bush’s critics in the Democratic Party and the news media.”

So the question is: would Bush be better off by saying “Sorry, folks, we thought there were WMD in Iraq, but it turns out we were wrong. And we miscalculated how difficult it would be to win the war, how many troops it would take, and how many lives would be lost. I still feel like it was right for us to go to war there for the following four reasons…”?

I’m not sure about that. He’d certainly be more intellectually honest, and a number of people in intellectual circles would feel better about him as a leader, but my guess is that he thinks it would cost him the election in today’s environment. My conclusion is that today’s system is discouraging politicians from admitting mistakes, and that it will take an exceptionally courageous leader (neither Bush nor Kerry as far as I can tell) to do so.

In the end, while humility appeals to many people in a leader, it’s not for everyone. Fortunately for us, CEOs don’t have to run for office and most CEOs don’t have to face some the same level of public, personally competitive, and media scrutiny that politicians do. Now that’s an interesting conclusion that I didn’t intend at the beginning of the post — being a good political leader and being a good politician are sometimes deeply at odds with each other.

Next up in the series: Not sure! Any ideas? Please comment on the blog site or by emailing me.

Sep 152004

Change of Name?

Change of Name

Fellow CEO Greg Reinacker posted an open question on his blog about whether he should change the name of his company, NewsGator. This is a GREAT topic.

We struggled with it for years at MovieFone, because at some point, the Internet became a huge part of the business, and the name seemed antiquated. Plus, everyone knew us by the phone number, 777-FILM (or whatever number it happened to be in any given city). But it had 10 years of brand equity at that point behind it.

Return Path used to be called uLocate.com a really long time ago, and we changed the name to be less “dot com” three months after we got started (that’a story for another posting as well). People ask me all the time if I sitll think that Return Path is the best name possible for the company. I’m sure there’s a better one out there, but I am sure it’s going to be hard to convince me to change it. Why? Let’s start with these 3 reasons:

1. It’s close enough. We’re in the email business, in general, and Return Path is a good name for people in the industry to remember (it’s the first two words in every email header) for people in the industry, and it’s easy enough to say.

2. It has good equity.
Almost five years in, most of our customers and industry watchers know it. Of course, it’s not Coke and has limited equity in the grand scheme of things, but its equity relative to the size of our enterprise is meaningful. That’s the important part. There’s a reason GE is still called GE even though its primary business is financial services now.

3. I have no idea what business we’re going to be in three years from now. Ok that’s an overstatement. I’m pretty sure we’ll still be in email. But while there are perhaps more appropriate names for us today, in today’s dynamic technology market, the company might look very different down the road, and changing a name is painful enough that I wouldn’t do it without a MAJOR event underway like a dramatic change of focus for the company, or a massive acquisition.

That said, if I had happened to name the company CompuTyco or EmailEnron, I’d change it because the collateral damage or risk thereof. If my mom had named me Adolph, Osama, or Saddam, I’d also be headed down to the courthouse to switch to a new one. They’re not as evil as a bad dictator of course, but Gator has so much baggage — they changed their own name to Claria!

So Greg, change that name despite the challenges outlined above. You’re lucky in that t’s still early enough for you. Just make sure you pick a new name that’s flexible and extensible into other areas in case the business you have in three years isn’t the business you have today. And don’t bother with an expensive naming consultant (let me know if you want to hear about that nightmare). Just have a good, structured brainstorm with your team.

Sep 152004

Spam: Crisis, or Approaching Denoument?

Spam: Crisis, or Approaching Denoument?

A few interesting comments on this front today. Fred says the crisis is over, everyone should just calm down. Pamela says spam filtering technology is getting really good now. And I had lunch with Saul Hansell from The New York Times today, who thinks that authentication will make a monumental difference.

[For those of you who read OnlyOnce and aren’t super technical, authentication is the newest trend that ISPs are starting to employ to snuff out spammers. In a nutshell, it’s a technology like Caller ID that lets an ISP verify who’s sending the mail so they can shut it down if the mailer is clearly a bad guy (or someone who blocks Caller ID).]

I’m not sure as Fred says the crisis is over — but I think it’s on the way to being minimized. And Pamela’s right — filters like Cloudmark are pretty darn effective. Things like that just need to be rolled out to broader audiences. And Pamela’s also right that mailers will have to work on managing their identity and reputation in order to cope with new technologies like authentication and beyond. That’s a posting for another day.

But before we declare victory, let’s remember two things:

– First, these things take a LONG time to trickle down to a broad enough audience to say “problem solved.” I mean YEARS.

– Second, the bad guys aren’t going to give up without a fight. This is war! They’ll be back and they’ll find us. They’ll get better at avoiding filters, and they’ll infiltrate things like authentication and exploit loopholes in CAN-SPAM and other legislation. Remember, spam’s economics still work.

So I’m happy to say Spam isn’t still in Crisis Mode, but it’s not resolved either — how about Approaching Denoument?

Sep 152004

Breaking Up Is Hard to Do, Continued

Breaking Up Is Hard to Do, Continued

My colleague Ed Taussig had a great comment on this posting that I thought I’d share since no one ever reads comments on blogs.

Firing someone should always be considered an opportunity for “Lessons Learned” – i.e. was there anything that as a manager I could have done differently to avoid getting to the point of having to fire someone in the first place?

Was it a failure to interview/hire properly in the first place? Was there a failure to mentor them or to give them constructive feedback before the problem became irreparable? Did I make an effort to find out what might be affecting their performance?

There will be times when the answer is none of the above and that there was nothing you could have done differently.

Even when there was something you might have done differently, it’s not a matter of assigning blame, but of learning something from a bad experience.

All excellent points, Ed. Thanks for the contribution!

Filed under: Leadership

Sep 122004

9/11 Remembered in NYC

It’s the end of a long September 11 in New York City. We thought everyone would want to see the Tribeca close-up of the “twin beams” memorial that comes out from time to time to evoke the memory of the fallen towers.

Lights_004_1

The beams are truly amazing, reaching up high into the sky, seemingly endless. While they are geographically incorrect from this particular view (the towers stood behind and to the left of the new construction of the new 7 World Trade Center), they do the job and from most views look in place.

Filed under: Current Affairs

Sep 112004

RSS and Email's Demise, Continued

RSS and Email’s Demise, Continued

Thanks to my colleague Tom Bartel, I discovered two good postings this week that I thought I’d pass on.

The first one by Ed Brill talks about Email vs. RSS and is a great contribution to the debate. It has some similar thoughts to my original posting about Prepping RSS for Prime Time.

The second one by Christopher Knight is entitled 22 Reasons Why Email Is Not Dead and is a great contribution to the dialog I contributed to in my Rumors of Email’s Demise posting a while back.

Filed under: Email

Sep 112004

Our Next July 4?

Our Next July 4?

We could hear the church bells ringing this morning out our window at the 9/11 memorial ceremony as we observed a moment of silence at 8:48 a.m. to remember. What really got me, though, was when I walked past the site and heard some of the names being called out by parents of the victims, their voices alternating between bravely strong and quivering with emotion.

There will always be something awful about this day every year, a wound reopened fresh over a healing scar. I hope that it will continue to serve as a unifying force in our country, an annual rallying cry against those in the world who threaten our way of life and seek to hurt or terrify us. It’s not exactly Independence Day, but perhaps it can over time come to mean something just as important for America.

Filed under: Current Affairs

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